Tax-Savvy Tips for New Business Owners

4 tips for wading your way through complicated tax issues

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December 7, 2005

One of the most aggravating aspects of being in business is
taxes-understanding them, keeping up with them and, worst of all,
paying them. But there are some things you can do as a new business
owner to make the process a little less painful. Attorney Stephen
Fishman, author of Wage Slave No More: Law & Taxes for the
Self-Employed offers the following tips:

1. Understand the various taxing entities. All levels of
government impose taxes. Be familiar with the requirements of each.
Federal taxes include income, self-employment, estimated and
employment taxes. State taxes include income, employment, sales,
property, and other types of taxes that may be unique to your
state. Many municipalities impose sales and property taxes on
business equipment and furniture.

2. If appropriate, preserve your independent contractor
status. If you operate as an independent contractor, protect
that status by using written contracts and controlling how and when
you do your work. If you hire independent contractors, do the same
for them.

3. Keep good records. Good records help avoid trouble
with the IRS and give you an accurate idea of how your business is
performing.

4. Understand what's deductible and what's not. A
deduction is an expense or the value of an item that you can
subtract from your gross income to determine your taxable income
and reduce the amount of tax you pay. Even if you have someone else
prepare your tax returns, take the time to learn what you can
deduct so you keep the right records and file an accurate
return.